Sarah's Organic Soap Company makes organic liquid soap. One of the raw materials for her soaps is
Question:
Sarah's Organic Soap Company makes organic liquid soap. One of the raw materials for her soaps is organic palm oil. She needs 500 kilograms of palm oil per day on average. The supplier charges a $54 delivery fee per order (which is independent of the order size) and $4.25 per kilogram. Sarah's annual holding cost is 15 percent. Assume she operates and sells five days per week, 52 weeks per year.
If Sarah wants to minimize her annual ordering and inventory holding costs, how much palm oil should she purchase with each order (in kilogram)? (5 points)
If Sarah orders 3,500 kilogram with each order, what would be the sum of the annual ordering and holding costs? (5 points)
Note: Do not round intermediate calculations.
If she were to purchase 15,000 kilogram per order, what would be her sum of the annual ordering and holding costs? (5 points)
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
2. A company purchases wood for use in its products. The firm uses 740 pounds of wood per week and purchases wood for $2 per pound from a supplier. The cost to hold one pound of wood in inventory for one year is $0.4. Each time the firm orders wood from the supplier, the firm must pay an order processing charge of $71.
What is the economic order quantity (in pounds)? (5 points)
Note: Assume there are 52 weeks in a year and round your answer to the nearest integer value.
3. A convenience store purchases magazines for $1.25 and sells them for $5. At the end of the month, each unsold magazine can be returned to the publisher for a $0.50 refund.
What is the overage cost for a magazine? (3 points)
Note: Round your answer to 2 decimal places.
4. (A store owner has determined that the overage cost for a product is $70 and the underage cost is $65.
What is the store owner's critical ratio?
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey